Risk-Off Start to the Week as Tariff Jitters Return

• Markets opened the week firmly on the defensive, with sentiment dented by fresh tariff rhetoric from Donald Trump aimed at parts of Europe.
• Risk appetite weakened after plans were floated for 10% tariffs from 1 February, potentially escalating to 25% by 1 June should negotiations fail with countries resisting US moves linked to Greenland.
• In Asia, China delivered Q4 GDP growth in line with its 5% target for 2025, but the detail beneath the headline pointed to a loss of economic momentum.
• December data highlighted that slowdown, with retail sales growth slipping to 0.9% yoy from 1.3%, while fixed asset investment deteriorated to -3.8% in 2025 from -2.6% in November.
• Back home, inflation pressures surprised to the upside, with the Melbourne Institute Monthly Inflation Gauge jumping 1.0% m/m in December, the strongest monthly outcome since late 2023 in Australia.